RGESS...income limit increased to Rs12 lakh

Income level to be raised from Rs. 10 lakh pa to Rs. 12 lakh pa

February 28, 2013 11:42 IST | India Infoline News Service
Presenting the Union Budget in Parliament today, the Finance Minister P Chidambaram expressed the hope that the India would achieve high economic growth despite slowdown in the global economic growth.

The Finance Bill 2013-14 proposes liberalisation of the Rajiv Gandhi Equity Savings Scheme (RGESS) that was launched in FY 2012-13. The first time investors will now be allowed to invest in mutual funds as well as listed shares. This investment can be done not in one year alone, but in three successive years.

The  Finance  Minister said  that  the  income  limit  is  also  being proposed to be raised from Rs.10 lakh  to Rs.12 lakh.

RGESS is a new tax benefit scheme introduced for equity investment in select stocks, mutual funds and ETFs (exchange traded funds) as declared by the Ministry of Finance.

Earlier the gross total annual income for people to invest in RGESS was less than or equal to Rs. 10 lakh per annum. In the Annual Budget 2013-14, the income level of individuals has been raised from Rs. 10 lakh pa to Rs. 12 lakh pa.

All new retail investors are allowed to invest up to Rs. 50,000 directly in equities, an income tax deduction of 50%. The scheme would have a lock-in period of three years and churning of portfolio is not permitted during the first one year. The scheme can be availed only once in a lifetime.

As proposed, this scheme will allow small investors to purchase shares only in the top 100 stocks traded on BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). The investors will likely be offered a ‘no frills’ demat account to encourage them getting started without worrying about the hefty annual charges for maintaining a demat account, which varies from Rs.500 to Rs. 1,000.

With an objective to encourage flow of savings of the small investors in domestic capital market, the Government of India announced a scheme RGESS.

A new section 80CCG under the Income Tax Act, 1961—on deduction of investment under an equity savings scheme—has been introduced to give tax benefits to ‘New’ retail investors who invest up to Rs. 50,000 in ‘eligible securities’.

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